Gold Prices Spike Amid US-China Tariffs, Mitigated Slightly By Strong US Dollar
Following the recent imposition of new tariffs by both the United States and China over the weekend, prices for gold immediately reacted and inched higher on Monday.
The increase in the price of the safe-haven asset was somewhat mitigated by the stability of the US dollar, which remained strong despite the ongoing trade dispute.
Spot gold increased by around 0.2 percent to $1,522.17 per ounce on Monday, after having fallen to a one-week low of $1,517.11 per ounce. US gold futures had also climbed slightly by about 0.1 percent to $1,531 per ounce.
Holdings in SPDR Gold Trust, the world's largest gold-backed ETF, has so far increased by 12 percent this year. Technical analysts have pegged gold prices to have support at around $1,515 to $1,520 and resistance at $1,535 per ounce. A number of investments firms have continued their bullish stance on gold prices, with some upgrading their net long positions.
Meanwhile, prices of other precious metals have seen a marginal decline following the increase in the price of gold. Silver prices dropped by about 0.2 percent to $18.31 per ounce. Platinum prices dropped by 0.3 percent to $927.71 per ounce, while palladium prices dipped by 0.2 percent to $1,528.63.
ABN Amro analyst Georgette Boele mentioned that the overall reaction of gold prices has remained subdued to the fact that the US dollar has remained strong. The effects of the recently imposed tariffs were mitigated, but it still managed to raise prices all the same.
The United States began imposing its previously mentioned tariffs on Chinese imports on Sunday. The 15 percent levy was imposed on billions of dollars worth of Chinese goods that include items such as smartwatches, flat-screen television, and footwear. Around the same time, China also slapped new tariffs on imports of US crude oil.
The US dollar continued to incrementally climb to a more-than two-year high last week, essentially making gold a lot more expensive for those intending to purchase the asset with other currencies. Analysts believe that the overall increase in gold prices over the last month should correct itself eventually.
In August, gold prices had increased by more than $100 dollars across the board mainly to several contributing factors that decreased investor sentiment in traditional equities.
These contributing factors included the rising tensions in the ongoing trade dispute between China and the United States as well as rising fears brought about by negative-yielding debts and possible interest rate cuts by global central banks.